International Trade Theory

Topics: International trade, Free trade, World Trade Organization Pages: 8 (2240 words) Published: October 24, 2012
The Ecuadorian

Rose Industry
snowcapped volcanoes that rise to more than 20,000 feet. The bushes are protected by 20-foot-high canopies of plastic sheeting. The combination of intense sunlight, fertile volcanic soil, an equatorial location, and high altitude makes for ideal growing conditions, allowing roses to flower almost year-round. Ecuador apparently has a comparative advantage in the production of roses. Ecuador's rose industry started some 20 years ago and has been expanding rapidly since. Ecuador is noW the world's fourth largest producer of roses. Roses are the nation's fifth largest export, with customers allover the world. Rose farms generate $240 million in sales and support tens of thousands of jobs. In Cayambe, the population has increased in 10 years from 10,000 to 70,000, primarily as a result of the rose industry. The revenues and taxes from rose growers have helped to sophisticated pave roads, build schools, and construct irrigation systems. Maria works Monday to Saturday, and earns $210 a month, which she says is an average wage in Ecuador and substantially above the country's $120 a month

It is 6:20 AM, February 7, in the Ecuadorian town of
Cayambe, and Maria Pacheco has just been dropped off for work by the company bus. She pulls on thick rubber gloves, wraps an apron over her white, traditional embroidered dress, and grabs her clippers, ready for another long day. Any other time of year, Maria would work until 2 PM, but it's a week before Valentine's Day, and Maria along with her 84 coworkers at the farm are likely to be busy until 5 PM. By then, Maria will have cut more than 1,000 rose stems. A few days later, after they have been refrigerated and shipped via aircraft, the roses Maria cut will be selling for premium prices in stores from New York to London. Ecuadorian roses are quickly becoming the Rolls Royce of roses. They have huge heads and unusually vibrant colors, including 10 different reds, from bleeding heart crimson to a rosy lover's blush. Most of Ecuador's 460 or so rose farms are located in the Cayambe and Cotopaxi regions, 10,000 feet up in the Andes about an hour's drive from the capital, Quito. The rose bushes are planted in huge flat fields at the foot of



I 1


nternational Trade Theory
LEARNING OBJECTIVES: After 'IOU have read this chapter

you should:

why nations trade with each other.

Be familiar with the different theories explaining trade flows between nations. Understand why many economists believe that unrestricted free trade between nations will,raise the economic welfare of countries that participate in a free trade system. Be familiar with the arguments of those who maintain that government can playa proactive role in promoting national competitive advantage in certain industries. Understand the important implications holds for business practice. that international trade theory

minimum wage. The farm also provides her with health care and a pension. By employing women such as Maria, the industry has fostered a social revolution in which mothers and wives have more control over their family's spending, especially on schooling for their children. For all of the benefits that roses have bought to Ecuador, where the gross national income per capita is only $1,080 a year, the industry has come under fire from environmentalists. Large growers have been accused of misusing a toxic mixture of pesticides, fungicides, and fumigants to grow and export unblemished pest-free flowers. Reports claim that workers often fumigate roses in street clothes without protective equipment. Some doctors and scientists claim that many of the industry's 50,000 employees have serious health problems as a result of exposure to toxic chemicals. A study by the International Labor Organization claimed that women in the industry had more miscarriages than average and that some 60 percent of all workers suffered from headaches, nausea,...
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